Comprehending Appraisals

Getting a house is the biggest transaction some people could ever encounter. Whether it's a main residence, an additional vacation home or a rental fixer upper, purchasing real property is a complex transaction that requires multiple people working in concert to pull it all off.

You're probably familiar with the parties having a role in the transaction. The real estate agent is the most known person in the transaction. Next, the bank provides the money needed to fund the deal. The title company ensures that all areas of the transaction are completed and that the title is clear to transfer to the buyer from the seller.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party is responsible for making sure the value of the real estate is consistent with the amount being paid? In comes the appraiser. We provide an unbiased estimate of what a buyer could expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Blue Ridge Appraisal Co., L.L.C. will ensure, you as an interested party, are informed.

The inspection is where an appraisal starts

To ascertain the true status of the property, it's our duty to first conduct a thorough inspection. We must see aspects of the property first hand, such as the number of bedrooms and bathrooms, the location, living areas, etc, to ensure they indeed are present and are in the condition a reasonable person would expect them to be. The inspection often includes a sketch of the property, ensuring the square footage is correct and conveying the layout of the property. Most importantly, the appraiser identifies any obvious amenities - or defects - that would have an impact on the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Cost Approach

This is where we gather information on local building costs, the cost of labor and other factors to figure out how much it would cost to replace the property being appraised. This figure usually sets the maximum on what a property would sell for. It's also the least used method.

Paired Sales Analysis

Appraisers become very familiar with the neighborhoods in which they appraise. They innately understand the value of certain features to the homeowners of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate being appraised. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they are more accurately in line with the features of subject.

  • Say, for example, the comparable has a fireplace and the subject does not, the appraiser may subtract the value of a fireplace from the sales price of the comparable home.
  • In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

After all differences have been accounted for, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to putting a value on features of homes in Staunton and Staunton City, Blue Ridge Appraisal Co., L.L.C. is second to none. This approach to value is commonly awarded the most consideration when an appraisal is for a home purchase.

Valuation Using the Income Approach

A third method of valuing approach to value is sometimes employed when an area has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the real estate generates is factored in with other rents in the area for comparable properties to determine the current value.

Reconciliation

Combining information from all approaches, the appraiser is then ready to put down an estimated market value for the property in question. The estimate of value on the appraisal report is not necessarily what's being paid for the property even though it is likely the best indication of what a property is worth. It's not uncommon for prices to be driven up or down by extenuating circumstances like the motivation or urgency of a seller or 'bidding wars'. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. It all comes down to this, an appraiser from Blue Ridge Appraisal Co., L.L.C. will guarantee you attain the most accurate property value, so you can make wise real estate decisions.

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